Financial News

Adam Posen: Osborne's Plan Is 'Misguided'

George Osborne's economic strategy is "misguided" and has left Britain "malnourished", according to a former Bank of England policymaker.

Adam Posen, who stepped down from the Monetary Policy Committee (MPC) in August, accused the Government of focusing on "the wrong goal".

He attacked the Chancellor and David Cameron for doggedly pursuing deficit reduction, which he claimed was "self-defeating", and urged them to change course.

His comments come a week after Mr Osborne's mini-Budget, in which the Chancellor insisted that to switch approach now would lead to "disaster".

Mr Posen told Prospect Magazine: "Sitting central bankers should not publicly comment on fiscal policy. Silence, however, was not assent on my part.

"For two-and-a-half years the Government's economic policies have focused on the wrong narrow goal, been self-defeating in pursuit of that goal and in so doing have eaten away at British economic capabilities and confidence."

He continued: "Unfortunately, his Autumn Statement reiterated the same misguided priorities of deficit reduction and the same failed approach, with only minor variations."

Arguing for a change of direction, he said: "It is not enough for Messrs Cameron and Osborne to claim that they have done what they promised to so.

"Their policies have left the British economy malnourished, and indeed made parts of it quite ill. There are alternatives available, and the British government should switch to these now."

Mr Posen, an American economist, joined the MPC in September 2009 but left earlier this year to become director at a US think tank.

On the committee, he was the only member to vote consistently for quantitative easing - the practice of printing more money to try and boost the economy.

He has previously advised parts of the US government, the European Commission, the Cabinet Office and the International Monetary Fund.

In his Autumn Statement last week, Mr Osborne admitted the Government is set to miss his target of reducing debt by 2015 and that slashing the deficit will take longer.

Despite criticism that he is not doing enough to stimulate growth and that his drastic austerity measures are holding back the recovery, the Chancellor refused to give ground.

"We cannot relax our efforts to make our economy safe but Britain is heading in the right direction. The road is hard but we're making progress. It's taking time, but the British economy is healing," he insisted.

However, official growth forecasts have been slashed - with the economy predicted to shrink by 0.1% this year and only grow by 1.2% in 2013.